The U.S. dollar edged up on Tuesday as investors awaited comments from Federal Reserve Chair Jerome Powell later in the session, following the central bank’s recent interest rate cut.
By 03:00 ET (08:00 GMT), the Dollar Index, which measures the greenback against six major currencies, ticked 0.1% higher to 97.012, rebounding modestly after yesterday’s decline.
Powell remarks in focus
The greenback has been trading in a narrow band this week after last week’s market volatility, with traders closely watching Powell’s upcoming speech. Last week, the Fed lowered rates by 25 basis points, but signals on the future path of policy left room for debate about further cuts before year-end.
New Fed Governor Stephen Miran advocated for more aggressive rate reductions on Monday, whereas other officials emphasized caution, keeping the focus on ensuring inflation returns to the Fed’s 2% target.
“They [Alberto Musalem, Raphael Bostic and Beth Hammack] do stand on the hawkish side of the spectrum, so that isn’t hugely surprising, but their comments suggest the hawkish front remains relatively firm despite stronger dovish pressure,” analysts at ING noted.
Markets currently assign around a 90% probability of a 25-basis point cut at the Fed’s October meeting and about a 75% chance of another reduction in December, according to CME’s FedWatch Tool.
Euro softens despite strong German PMIs
EUR/USD eased 0.1% to 1.1789, retracing some of Monday’s gains. Early data showed that Germany’s business activity accelerated in September, driven primarily by a rebound in the services sector.
The HCOB German flash composite Purchasing Managers’ Index, compiled by S&P Global, climbed to 52.4 in September from 50.5 in August, above expectations of 50.6. This is the fourth straight month the composite index—covering services and manufacturing, which account for more than two-thirds of the economy—has stayed above 50, signaling growth.
“This shouldn’t justify much more idiosyncratic enthusiasm for the euro, but it is probably enough to keep the common currency in a good position to benefit from more rotations away from the dollar,” ING said.
“We expect EUR/USD to stabilise around 1.1800 today, with further moderate gains possible later this week.”
GBP/USD rose 0.1% to 1.3522, rebounding from last week’s two-week low.
Asian currencies steady
In Asia, USD/JPY traded broadly unchanged at 147.74, and USD/CNY was steady at 7.1148 after the Bank of Japan and People’s Bank of China left interest rates unchanged in recent sessions.
AUD/USD slipped 0.1% to 0.6590 after a private survey showed that Australia’s business activity growth slowed in September, with U.S. tariffs weighing on exports and new orders.
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